‘Leadership is the magic’
Could you tell us what is the magic behind
the turn around by the Railways which was on the brink of financial disaster,
according to an expert committee?
AS: It is very much talked about that you played a crucial role in achieving perfect alignment with the top management. How it was done?
SK: We do not interfere in day-to-day working. We are giving them full operational freedom. We are only giving strategic direction. How do they achieve that intent is their decision. So lot of capacity building, lot of empowerment is being done. Here again the triple magic formula is ‘Empowerment’, ‘Enrichment’ and ‘Entitlement’. If you work on this triple magic formula of empowerment, enrichment and entitlement, then you can build up a wonderful team.
AS: What are the key drivers of ‘turn around’ of Indian Railways?
SK: At conceptual level the three key drivers are ‘Faster’, ‘Heavier’ and ‘Longer’ trains whereas at operational level ‘Leveraging’, ‘Synergy’ and ‘Optimization’ are the main drivers. Instead of sweating customers harder, we are sweating assets harder. The core is optimum utilization of assets.
At the emotional level three key words are: ‘Innovation’, ‘Compassion’ and ‘Partnerships’.
Innovation means you have to be imaginative and innovative in your day-to-day operations. Whether it is commercial operation or investment decisions, you should always come up with new workable ideas.
Compassion means that your strategy should not create any losers. Indian Railways is the lifeline of the nation. Our services are meant for everybody, from Industrialist to the backbenchers of the society. The poor people, the destitute, and the farmers- everybody use railways. You cannot earn profit at the cost of the common man. Therefore in turning Railways around, lot of compassion and sympathy is required.
It was like preparing an omelet without breaking any egg. It may appear to be an impossible proposition. But what looks an impossible proposition for preparing an egg omelet may not be an impossible proposition if it is a business omelet.
In business, you can achieve this by playing on volumes. By increasing volumes you can reduce your unit cost, you can reduce your tariffs, and you can improve your margin and market share. Hence you can earn profits.
In this fashion, we were able to cut down our unit cost of operations by about 14 percent over the last few years- from 61 paise per NTKM to 53 paise per NTKM last year.
So we created a real win-win equation. We reduced passenger’s fares of all classes- 1AC by 24 percent; 2AC by 18 percent; 3AC by 40 percent in Gharib Rath; sleeper by 4 percent; and unreserved tickets- Rs 2 per ticket. We not only reduced the passenger losses by Rs 3000 crores but we were able to reduce the burden on common passengers too by lowering fares.
Our passenger loss, which at one point of time was about Rs 8,400 crore, has come down to about Rs 5,500 crore. We are very confident that if we play our cards well, if we increase the length of the passenger trains, if we increase the occupancy of the trains, if we optimize the lay out of the coaches, and if we increase earnings from non-passenger fare income like catering, advertising, publicity, parking, land leasing, we can further reduce the passenger losses. Faster, heavier and longer trains drive this turnaround.
Leveraging, synergy and optimization have fueled it. And it is emotionally supported by innovation, passion, and compassion and by building powerful partnership. By this partnership I mean public-private partnership or public-public partnership.
AS: What is Railways policy in respect of Foreign Direct Investment?
SK: In this regard, Railways follows policy of Government of India. Wherever FDI policy of the Government of India permits and whatever percentage is permitted we allow that.
In core railway operation FDI is not permitted at present. But in non-core operation FDI is permitted. For example, scheduling and movement of trains is a core area function of Railways. We have permitted private parties to run their own container trains. Private container operators are booking the traffic, collecting it, putting it in their wagons, and bringing it to the station. We are providing them our terminals and locos. They are taking it from place to place, collecting and then delivering it. This is a non-core function, and FDI is permitted in it.
AS: What is the response for opening the container business for the Private Sector?
SK: There is terrific response. 15 operators have taken container train licenses.
AS: In parcel booking railways have been reportedly incurring around Rs 1300 crore loss. What is the situation today?
SK: Losses in parcel business have substantially come down. Earnings have gone up from Rs 458 cr to about Rs 1000 cr. Other Coaching Earnings have improved from Rs 890 cr to Rs 1728 cr. Our Sundry Earnings which include, earnings from catering, land lease, and advertisements, have also gone up from Rs 900 cr to about Rs 1800 cr. Earnings have increased by almost 100 percent over the last three years.
AS: One of your major concerns was Operating Ratio. Where it stands now?
SK: Recently our Minister was honored by the Union of the International Railways for achieving the best Operating Ratio in the world. It is 78 percent. It is the best Operating Ratio in Railways in the world. Indian Railways is only Railways in the world where a passenger can travel from one point to another point by paying $ 2 a month only. For $ 2 a month, you can ride a train any number of times, for a distance up to 10 kilometers from point to point. And still our Mumbai suburban service is a profit-making service.
If you compare it with London, New York or Paris, your two-way journey from one point to another will cost $ 10 for one day. And we are charging $ 2 per month only for 60 or even 100 journeys. We are making profits whereas they require subsidies. So there is something in Indian Railways, which makes it profitable. Even at this fare, our fund balance is $ 5 billion.
AS: It appears IT is going to get a major focus in your future planning. Could you enlighten us more on this?
SK: IT will be a major plank of Indian Railway’s future growth plan. In the 11th Five Year Plan, we will be investing about $ 1.5 billion on IT projects to harness the immense possibilities offered by IT in the interest of Indian Railways. IT applications will be applied to increase passenger and freight earnings, to improve the image of the Railways in the eyes of the customer, to reduce operating costs, to ensure effective utilization of human and physical resources and to help the top management in arriving at long-term policy decisions by developing MIS & LRDSS.
Other major IT initiatives are aimed to improve utilization and maintenance of its rolling stock, for better capacity utilization and to improve output. The initiatives also include providing hand-held palm tops to ticket examiners, building cyber cafes at stations, digitizing the signaling system and linking all online applications with the computerized reservation system and tracking the passenger and freight trains.
A commercial portal will be developed for yield management, especially to attract traffic for empty returning wagons and filling up vacant seats. All modules of Freight Operations Information System (FOIS) including rolling stock maintenance and examination, revenue apportionment, crew management etc. will be integrated and implemented in a time bound manner for completion by 2010. FOIS enables freight users to have instant access to information regarding the current status of their consignments in transit, allowing them to implement just in time inventory management systems and better logistics management. In a word FOIS ensures optimization of asset utilization.
addition, ERP packages will also be implemented in workshops, production
units and selected zonal railways. A common website integrating all the
web sites of Railways will be developed with built-in facilities like
e-payment and e tendering. Apart from our own IT wing ‘CRIS’, we will
be involving Indian IT companies to take part in various IT projects of
the Railways under public- private partnership. The PPP will give added
strength to our efforts to achieve our objectives.
August 15, 2007